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Corporate Social Responsibility in Supply Chain Management Essay

Case Study: Singapore

The case was developed with the cooperation of Singapore Compact for CSR solely for educational purposes as a contribution to the Project entitled “New Corporate Procurement Strategy on Trade in Goods and Services in APEC Region – Supply-chain options with CSR perspective -” conducted under the auspices of the Asia Pacific Economic Cooperation (APEC). The case is neither designed nor intended to illustrate the correct or incorrect management of the situation or issues contained in the case. No part of this case can be reproduced, stored or used without the written permission of the author and the Asia Pacific Economic Cooperation. © 2007 APEC Secretariat 216

Case Study: Singapore

Executive Summary NTUC FairPrice Cooperative Ltd is the leading supermarket retailer in Singapore. The company is known as a “supermarket with social conscience.” Its supply chain activities focus on developing effective strategies to improve product quality and safety by working closely with its suppliers in implementing standards and good CSR practices. Singapore imports 95% of its vegetables from other economies since the local farms cannot meet the local demand. FairPrice itself imports about 80% of its vegetables. Sellers need to ensure that the vegetables are safe for consumption and its supply is ample. FairPrice invested in a fresh food distribution center in 2002 to enhance its ability to move its stock faster and maintain freshness quality.

The Good Agricultural Practices for Vegetable Farming (GAP-VF) certification ensures that local suppliers meet the standard but the certification does not cover overseas suppliers. FairPrice needs to encourage these overseas suppliers to adopt similar standards. The standard applied to organic vegetables is even higher. FairPrice works with Agrifood Technologies Pte Ltd to develop an in-house certification program that would provide assurance of the integrity of the organic produce. FairPrice participates in the Pekan Baru project, a collaboration of the Indonesian and Singapore governments. FairPrice purchases 50 tons of vegetables per week from Pekan Baru. As the sole importer of the vegetables produced in Pekan Baru, FairPrice provides more work and income for more than 500 farmers and many operators along the supply chain.

The project also involves technology transfer which helps the farmers to implement good agricultural practices and get higher yields of better quality vegetables. Pekan Beru farmers learned the technology on cold chain management which makes it possible to maintain the freshness of vegetables while being transported from the farm to FairPrice distribution centers. With quality assurance, FairPrice packages the vegetables under its house brand, Pasar. Branding the vegetables under Pasar has helped to market and increase demand for vegetables from Pekan Baru since FairPrice is a trusted brand in Singapore. CSR is a journey and FairPrice continues to strive to be the best place to shop, the best place to work, and the best corporate citizen.

Introduction In the retail sector, companies compete for the consumer’s money by looking at the marketing mix of 4Ps – Product, Price, Place and Promotion. These are traditionally the four factors that retailers consider in their marketing strategy. However, due to globalization and better consumer awareness, retailers need to address another 3Ps – People, Planet and (not only) Profit. Consumers no longer just buy what is displayed on the retail shelves. They are asking questions as to how the products have been produced, and what has been their impact on society and the environment. For retailers to compete effectively in the market today, they need to assure consumers that what they put on the retail shelves are ‘ethical products’. In the supermarket retail industry, product quality (e.g. freshness, taste) and safety are two of the key concerns. If consumers in Singapore are in doubt about the product quality and safety of any retailer, they have alternative sources such as vendors in local fresh produce markets. Hence, to 217

Case Study: Singapore

compete effectively, supermarket retailers need to look at how and not just what they are doing in business. By examining the opportunities and challenges in the context of Corporate Social Responsibility (CSR) within the supply chain, businesses can sharpen their competitive edge and be good corporate citizens.

Company Profile Established in 1973 by the labour movement, NTUC FairPrice Cooperative Ltd has grown from its first shop set up to moderate the price of sugar and rice to being the leading supermarket retailer in Singapore. It employs over 5,000 and runs a retail network of 216 outlets comprising 76 FairPrice supermarkets, one FairPrice Finest, two FairPrice Xtra (Hypermart), three Homemarts, 19 FairPrice Xpress and 116 Cheers Convenience Stores. FairPrice’s founding mission was to moderate the cost of living for the ordinary households in Singapore. Over the years, FairPrice’s mission has evolved to its present mission which is to moderate the costs of a good life. Essentially, FairPrice’s aim is to be: • • • the best place to shop, the best place to work, and the best corporate citizen.

To be the best place to shop, FairPrice focuses on maximizing consumer satisfaction which is based on its brand promise of delivering value, quality and service. Key to this commitment are its procurement practices. FairPrice’s product sourcing takes into account consumer feedback and needs, and market trends. It sources from established and reputable companies. It always tries to diversify its sources of supply, particularly for essential items. It also develops its own range of house brand products to offer consumers an alternative to national brands. FairPrice plays a strong role in establishing the price of essentials in Singapore.

During the avian flu outbreak that resulted in the ban of egg imports from the region, FairPrice responded swiftly to the crisis by putting in place precautionary measures to curb profiteering. To prevent arbitrage, FairPrice took unpopular but necessary measures in restricting the purchase of eggs. To further alleviate the egg shortage, it imported Australian and New Zealand eggs as alternatives. Even after the ban on Malaysian poultry imports was lifted, FairPrice continued its efforts in working with business partners to peg chicken and egg prices at a reasonable level. Through this, FairPrice helped restore egg prices to pre-ban levels.

To be the best place to work, FairPrice is a unionized employer that has good labour-management relationship. FairPrice takes a holistic approach in providing for employees well-being and opportunities for growth and development. FairPrice received the Work-life Excellence Award 2006 conferred by the tripartite committee on Work-life Strategy Singapore, in recognition of its programs to help employees balance personal commitments and work responsibilities.

FairPrice contributes to the community through its own initiatives such as its annual Used Textbooks project, its Million Dollar Food Voucher Scheme for the needy and the provision of study grants to children of needy members. It also engages its network of suppliers to support its community efforts such as Heartstrings Buys, a fund-raising drive for the Community Chest. To promote environment protection, FairPrice launched the ‘Love Nature’ reusable bags to encourage its customers to reduce their reliance on plastic bags when shopping for groceries and necessities. In addition, the company participated in the ‘Bring Your Own Bag Day’ to encourage 218

Case Study: Singapore

shoppers to bring their own shopping bags instead of using plastic bags. Cashiers at the retail stores have been trained to pack more items in each bag to reduce the consumption of plastic bags. As a good corporate citizen, FairPrice was cited as the “supermarket with a social conscience” by the Far East Economic Review in a 2000 survey report. In September 2005, FairPrice signed the UN Global Compact (UNGC) to support the initiative of the Singapore Compact movement to establish a UNGC network in Singapore and help raise awareness among more companies of the key principles of CSR which it upholds.

FairPrice was also conferred the President’s Social Service Award in 2005 in recognition of its contributions to society. As a responsible food retailer, FairPrice is both a Case Trust accredited member and a Food Safety Partner of Agri-Food & Veterinary Authority (AVA) the economy-wide food safety authority of Singapore. FairPrice also supports pro-family initiatives and prides itself as a pro-family business retailer. It was voted one of the best loved pro-family retailers in the Singapore 2006 contest organized by the Ministry of Community Development, Youth & Sports. In another survey conducted by the Reader’s Digest in 2006, FairPrice was voted in by consumers and won the Trusted Brand Gold Award for the supermarket chain category in Singapore.

The Supply Chain Singapore has only 256 licensed farms covering 746 hectares1 which cannot supply enough fresh meat, fruits and vegetables to meet the demand of its population of 4.4 million. Singapore imports 95% of its vegetables worth S$314 million since local farms can meet only 5% of the demand for vegetables. It imports vegetables from Australia, China, Indonesia, Malaysia, Thailand, The United States and Viet Nam. With Singapore’s high dependence on imported fresh vegetables, local sellers such as supermarkets need to ensure that the imported food is safe for consumption and its supply is ample.

FairPrice invested S$25 million on a 130,000 square feet fresh food distribution center in 2002 to better manage its supply chain for fresh food. The setting up of the fresh food distribution center enhances the ability of FairPrice to move its stock faster and maintain freshness quality. The distribution center also provides the right infrastructure to improve the handling process of fresh food, thus reducing spoilage. Good temperature management and storage management are critical in maintaining the quality of food and preventing cross-contamination. FairPrice is committed to maintain a high standard of food safety and hygiene at the fresh food distribution center by getting the center to be Hazard Analysis Critical Control Points (HACCP) certified.

From the distribution center to the retail stores, FairPrice uses refrigerated trucks to transport the vegetables. At the store, temperature checks are conducted again before putting the vegetables on the retail shelves. FairPrice works with the relevant authorities to develop standards. One such initiative is the implementation of the technical reference standards on cold chain management for chilled pork in 2005. The standard was developed by AVA and SPRING Singapore, the economy-wide standard body, together with FairPrice. It provides strict receiving, storage and display guidelines to ensure that the quality of the pork is not compromised.

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